Bangladesh safety accord criticized by U.S. retail federation; no compromise looks to be in sight

By Andria Cheng

Reuters

The eight-story building collapse in April in Bangladesh killed more than 1100 garment workers.

Ahead of a midnight deadline to sign up for an accord that would legally bind signatory companies to help shoulder the costs of factory repair and renovation in Bangladesh, U.S. retailers defended their decision to reject the accord , which has resulted in a glaring absence of U.S. companies endorsing it. The accord is backed by Europe-based international labor unions IndustriAll and UNI Global Union as well as several non-profit groups including Washington-based Worker Rights Consortium.

On Wednesday, the U.S. retail industry’s leading trade group National Retail Federation criticized the accord as “a one-size-fits-all approach without any recognition as to how the industry operates around the world.” It said while “the proposal put forth by the labor unions addresses a number of shared concerns, the accord veers away from commonsense solutions and seeks to advance a narrow agenda driven by special interests.”

“Retailers are committed to a plan of action that is both workable and sustainable,” NRF’s President and Chief Executive Matthew Shay said, adding the group has been working with stakeholders for a number of months to come up with a solution to address the safety issues in Bangladesh. NRF and several other U.S. and Canadian trade groups hosted a conference call with an unidentified number of retailers and manufacturers on Tuesday.

“The IndustriALL plan isn’t a plan at all; it gives no clear path to practical and immediate solutions to the challenges facing the Bangladeshi garment industry. It seeks major funding by private business without providing accountability for how funds are spent, as well as binding retailers to specific resourcing requirements without taking into account the impracticality of such a requirement. And it exposes American companies to a legally questionable binding arbitration provision, a process that serves only the unions, not the workers they represent,” Shay said.

For now, there doesn’t look to be resolution in sight as the labor groups have no intention to budge on the legally binding language, Worker Rights Consortium spokeswoman Theresa Haas said in an interview.

Those that refuse to sign “don’t want to be on the hook for providing the workers’ safety and that’s not acceptable,” she told MarketWatch. Wal-Mart’s and other retailers’ proposals “are not legally binding and enforceable. It means they can renege on it anytime. Our experience has showed us with tragedies like this, companies like Wal-Mart express their concern initially but once the spotlight fades, they return to their previous practices that lead to these accidents occurring in the first place.”

Wal-Mart on Tuesday said it will conduct in-depth inspections of about 280 factories making its goods and make the findings public. The company said late Tuesday it’s “not in a position to sign the IndustriAll accord at this time.”

“While we agree with much of the proposal, the IndustriALL plan also introduces requirements, including governance and dispute resolution mechanisms, on supply chain matters that are appropriately left to retailers, suppliers and government, and are unnecessary to achieve fire and safety goals,” Wal-Mart said in a statement, adding because accord has a 45-day discussion period, it’ll sign on if its concerns can be addressed.

Gap, which produces in 78 factories there, told MarketWatch on Tuesday the accord would “open legal flood gates” to plaintiffs to sue U.S. companies and said it’s “six sentences away” from signing the deal if an amendment can be made about the legally binding resolution part. It said this was a worry because the U.S. is a more litigious culture than its European counterparts, the company said it has been conducting its own inspections and last year committed up to $22 million for building repair and worker compensation.

“The claim Gap has made is completely disingenuous,” Haas said. “Gap is making the claim that they are worried about potential lawsuits. By proposing the voluntary program, they are essentially giving themselves an out any time they want to be able to go back on their commitments because it conflicts with their business practices. The distinction Gap is making between U.S. and European companies is a false distinction.”

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Behind the Storefront is a blog about all things retail. It’s aimed at investors, shoppers and anyone else with a passion for learning about what drives consumer behavior. Hosted by Andria Cheng, Behind the Storefront will cover the business, brands and shopping behavior that’s behind some of the biggest companies, and largest employers, in the world. You can reach Andria at Acheng@marketwatch.com.